Thousands of patients surprised with out-of-network charges will receive $385,101 in restitution

OLYMPIA — Attorney General Bob Ferguson today announced that affiliated health care providers, Providence Health & Services and Swedish Health Services, will pay more than $1.4 million as a result of an investigation by the Attorney General’s Office. Providence and Swedish failed to disclose use of a pathology lab that was out-of-network for many of their patients, resulting in hundreds of thousands of dollars in unexpected charges for more than 6,400 Washingtonians who received pathology testing in 2015 and 2016.

Providence’s Western Washington facilities and Swedish facilities exclusively use CellNetix for pathology testing. From January 2015 to February 2016, Premera Blue Cross, a health insurer for many Providence and Swedish patients, pulled CellNetix from its network. Despite having advance notice of the change, Swedish and Providence failed to inform their patients that an out-of-network lab would be providing their pathology testing. Consequently, Premera-insured patients received substantially higher medical bills than they expected.

For more than a year, Providence and Swedish did not notify their patients of their use of CellNetix, despite many complaints from patients, including their own employees. In that timeframe, individual Premera patients paid CellNetix between $7 and $7,000 for testing.

The complaint, filed in King County Superior Court, alleges that the companies’ failure to inform their patients about their use of an out-of-network lab violates the Consumer Protection Act.

Patients who paid the CellNetix out-of-network charges will receive a total of $385,101 in restitution, which represents the estimated amount of unexpected out-of-network charges consumers paid beyond what they would have paid for in-network lab testing.

“Patients deserve to know what to expect from their medical bills,” Ferguson said. “Navigating our health system is challenging, and this type of unfair and deceptive conduct just makes things harder for patients.”

Premera terminated CellNetix from its network in January 2015 after a contract dispute. Both companies sent multiple notices to Providence and Swedish months in advance that CellNetix would be pulled from the Premera network. Providence and Swedish affiliated in 2012.

In one of these notices, Premera explained that it was notifying hospitals of its termination of CellNetix because hospitals choose which pathology lab to use, meaning patients are typically “not even aware of where their lab or pathology tests are sent.”

On Jan. 5, 2015, a Swedish executive warned that “patients don’t really have a choice of using CellNetix or not when they come to Swedish… so they will not be happy if they get a bill for the outofnetwork difference.”

Despite warnings from its employees and advance notice from Premera and CellNetix, Providence and Swedish took no action to notify patients about the use of CellNetix in their care.

Many patients complained of receiving out-of-network charges, including one of Providence’s own staff members, who received a bill from CellNetix for his own treatment at Providence. In August 2015, the staff member told Providence leadership that he was “learning the hard way that CellNetix is out of network for Premera,” which was “not disclosed to me when I came in for surgery.”

The physician urged Providence leadership to tell patients when CellNetix was out of their network. Providence did not follow this advice.

In a December 2015 email, which was forwarded to Swedish’s leadership, a Swedish financial counselor stated that “one of the most voiced complaints from out-patients beyond their bill is that they were not informed of the out-of-network issue.”

She suggested the hospital begin posting signs warning patients about their use of CellNetix. Swedish did not take any steps to provide this warning.

In a complaint to Swedish, a Premera-insured patient said she assumed that “only Premera Network contracted providers could participate in my care or that I would be given informed consent and choice about the likelihood of substantial additional costs.”

Providence and Swedish did not change their contracts with CellNetix after receiving these complaints, even when they had the opportunity to do so. Instead, Swedish and Providence renewed their contracts with CellNetix in October 2015 and January 2016 without renegotiating the terms to allow the use of another lab within Premera’s network.

As a result of the Attorney General’s investigation, Providence and Swedish entered into a consent decree filed in King County Superior Court. The consent decree requires Providence and Swedish to pay:

$385,101 in restitution for the Swedish and Providence patients who paid the out-of-network costs; and

$1,053,899 to the Attorney General’s Office to recover the costs of its investigation and legal action and fund consumer protection efforts in Washington.

Patients will receive restitution checks at the address CellNetix has on file for the patient.

The consent decree also requires that if Providence and Swedish use out-of-network labs on an exclusive basis in the future, they must either provide sufficient notice to patients, or maintain contract terms preventing out-of-network labs used on an exclusive basis from billing patients for more than what their bill would have been if the lab was in-network.

Assistant Attorney General Audrey Udashen is handling the case for the Attorney General’s Office.

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The Office of the Attorney General is the chief legal office for the state of Washington with attorneys and staff in 27 divisions across the state providing legal services to roughly 200 state agencies, boards and commissions. Visit www.atg.wa.gov to learn more.